Question

Lizzie planned on producing 50,000 bags in 2013 and using 0.75 metres of material at $1.85 per metre for each bag. In 2013, Lizzie actually used 41,500 metres of material in production at a cost of $2.00 per metre.

a) Calculate the direct materials price variance: $ Answer

b) Is the direct materials price variance favourable or unfavourable?

c) Calculate the direct materials quantity variance: $ Answer

d) Is the direct materials quantity variance favourable or unfavourable?

e) Calculate the total direct materials variance: $ Answer

f) Is the total direct materials variance favourable or unfavourable?

Answer 1

Direct Material Price Variance = (Standard Price – Actual Price)*Actual Quantity

=(1.85-2)*41,500

= 6,225 U

b) Direct materials price variance is unfavourable since actual cost is more than standard cost

C) Direct materials quantity variance = (Standard Quantity – Actual Quantity)*Standard Price

= (50,000*0.75 – 41,500)*1.85

= 7,400 U

d) Direct materials quantity variance favourable unfavourable since actual cost is more than standard cost

e) Total direct materials variance = Direct materials price variance + Direct materials quantity variance

= 6225+7400

=13,625 U

f) Total direct materials variance is unfavourable since actual cost is more than standard cost